Lean analytics is a way of approaching startup building that aims to achieve the lean startup model—namely, being scalable, sustainable, and repeatable.
Here, we’ll be taking a look into this concept, so that you can start to apply it to your own business.
What Is Lean Analytics?
Lean analytics falls under the umbrella of the lean startup approach. This approach sees the startup founder’s primary concern as finding the overlap between the customer, the problem they will pay you to solve, and the solution they will pay for.
The cycle that helps achieve that is:
- Build something small that users can try.
- Collect data about the experiences and behaviors.
- Adjust your course accordingly.
Lean analytics applies to steps two and three.
Lean analytics is not a set of metrics. You choose the metrics that will bring you closer to your business goals. It recommends ratios because they are understandable, comparable, and easier to act on.
The lean analytics cycle.
The 5 Stages of Lean Analytics
According to the book Lean Analytics by Yoskovitz and Croll, businesses should build products in the following stages:
- Customer Empathy: Making sure your product actually solves a problem for your target market. What are their real needs?
- Stickiness: Making sure your target market will keep using your product. What is the retention rate? How often do users come back? Why do users leave?
- Virality: Getting users to invite other users. What will incentivize people to spread the word? Is our onboarding process effective?
- Revenue: Monetizing your user base. How much are users willing to pay?
- Scaling: Increasing acquisition and retention rates while maintaining profitability.
According to Yoskovitz and Croll, going through these stages in order is incredibly important. If you move into the scaling stage when your product hasn’t been tested for stickiness, you might see a quick increase in users that falls equally quickly.
Example of Lean Analytics in Action
In lean analytics, every decision is a hypothesis that must be tested (e.g., “By changing X, I believe Y will happen”).
To illustrate, let’s look at an example of a food delivery app:
|Empathy||I think a food allergy filter is something that my users are missing with competing food delivery apps.||Feature request poll.|
|Stickiness||I think a monthly paid membership that offers free delivery will keep people coming back.||Beta test + user feedback forum.|
|Virality||I think free delivery credits will be enough incentive to increase referrals||Beta test + referrals and signup tracking.|
|Revenue||I think users would be willing to pay a service fee that’s 5% higher.||A/B test + order volume tracking.|
|Scale||I think I’ve found a sustainable business model with enough differentiation to last.||Tracking analytics (growth, retention, acquisition, etc.)|
Start Practicing Lean Analytics at Your Company
Lean analytics are designed to grow your company quickly and sustainably by following a logical series of stages.
If you’re looking for more personalized advice about building a startup, Growth Mentor can help. Members can book unlimited calls with over 400 talented mentors and coaches who have the skills and experience to steer you in the right direction.